State Pensions for the Self-Employed

Not all people will have entered into a personal private pension plan and will rely on the Basic State Pension.  Our guide should give you all the necessary information to make sure you can make the right provisions as a self-employed person to take full advantage of this.

Eligibility

Basic State Pension or BSP is awarded upon state pensionable age (SPA) to all people who have made the requisite amount of years National Insurance contributions.  The requirements for receiving 100% BSP are as follows.

If you reached SPA on or after the 6^th of April 2010

• Must have made 30 years National Insurance contributions upon reaching SPA

If you have reached SPA before the 6^th of April 2010

• Men must have made 44 qualifying years National Insurance contributions
• Women must have made 39 qualifying years National Insurance contributions

Self-employed contributions

Self-employed people may have to make both Class 2 and Class 4 contributions

Class 2 Contributions

• Flat rate of £2.40 per week paid either monthly by direct debit or by quarterly bill
• You may be exempt from payment of Class 2 contributions if your net earnings fall below the Small Earnings Exemption Limit or SEE of £5,072 per annum.  This is not an automatic exemption and must be claimed from HMRC.  This, however, does mean you are also exempt from any benefit associated with Class 2 NICs.
• Paying the Class 2 NICs will entitle you to nearly all of the benefits that a payee employee paying Class 1 NICs will receive.

Class 4 Contributions

• Paid in addition to Class 2 NICs if your earnings exceed the lower profit limit of £5,715 per annum.  In addition to this you will pay 1% for any earning above the upper profit limit of £43,875 per annum.  This is paid at the same time as your income tax.

Additional Pension Benefits

Persons paying Class 1 NICs are also required to contribute towards what used to be known as SERPs and is now known as S2P.  This is a top up linked to NICs that is designed to help people on low to moderate incomes, carers and disabled people.

Employees paying Class 1 NICs must contribute towards the second State Pension unless they have made arrangements for a personal private pension or occupational pension that is contracted out.

Self-employed people paying Class 2 and Class 4 NICs are not eligible for S2P as these particular contributions do not build up an additional pension benefit.

Start Saving Now

This table compares four saving products that can help you to save more for your retirement. We have chosen products that can bring you extra money in the future. Which one to choose from, it will depend on the type of investment you want.

Provider	Product	Advantages	Disadvantages	More Info
	MoneyBuilder	• Tax free end cash pay-out • Monthly contribution starts at only £10 • Life cover included	• 15 years plan • Early “cash in” is not an option as you will lose too much
	Stocks&Shares ISA	• Returns free of Income and Capital Gains Tax under ISA rules • Monthly contribution from £30 • No restrictions on the amount of time you keep the money invested • You can transfer the ISA	• £10,680 maximum contribution in one year • It isn’t risk free
	Cash ISA	• Good online support and advising • You can transfer the ISA • They won’t charge for withdraws • You know what savings rates to expect • Tax free interest	• £5,340 maximum contribution in one year
	3 year Fixed Rate ISA	• Fixed rate, risk free • You can transfer the ISA • Tax free interest	• £5,340 maximum contribution in one year • Limited to 3 years

More Information on State Pensions

Additional State Pension

Voluntary National Insurance Contributions

State Pension for the Self Employed

Deferring your State Pension

What happens when you die?

Contracting Out

State Pension – FAQ